This Statement of Administration Policy provides the
Administration's views on the Department of Defense Appropriations Bill,
FY 2001, as reported by the House Committee. As the House develops its
version of the bill, your consideration of the Administration's views
would be appreciated.

The Committee bill provides about $4 billion more for Department of
Defense programs in FY 2001 than requested by the President. The
President's fiscal and spending priorities provide a balanced approach
that maintains fiscal discipline, eliminates the national debt, and
extends the solvency of Social Security and Medicare. Providing
additional funds for defense in excess of the significant increases
sought by the President over FY 2000 levels would reduce resources for
non-defense programs that are also critical to our Nation's future.

Health Care for Medicare-Eligible Military Retirees

The Committee has provided $94 million for the new Medicare-eligible
retiree pharmacy benefit proposed by the House Armed Services Committee.
As the President stated last month, he believes strongly that military
retirees -- as well as all other retirees -- must have access to
voluntary, affordable prescription drug coverage. However, the
Administration is concerned that this funding level will not cover the
cost of the program, which we estimate to be close to $200 million in FY
2001. We urge the Congress to fully fund this proposal, especially in
the context of funds already provided in this bill.

The Administration has similar concerns with the lack of funding
provided for the proposed extension and expansion of the TRICARE Senior
Prime (Medicare subvention) demonstration program. We estimate the costs
of expanding this program nationwide to be $350 million per year to the
Department of Defense alone. We believe strongly that health care
coverage for our military retiree population is critically important.
However, the Defense Health Program already faces significant challenges
in managing expanding benefits in the face of fiscal constraints, which
would only be compounded by the need to fund these new programs.

Expansion of the Medicare subvention demonstration, as provided in
the House-passed DoD Authorization bill, would also have significant
costs to Medicare, which would diminish the solvency of the Trust Funds
and require an offset. CBO has estimated that costs to Medicare would be
$285 million over the next five years and $945 million over the next ten
years. The Administration believes costs may be even higher, depending
on how the provision is implemented. Additionally, the Administration is
concerned about expanding the demonstration without evaluating it first.
A lower cost, more prudent policy would be to extend the existing
demonstration for only one or two years to complete the evaluation
before making decisions about expansion.

Joint Strike Fighter

The Administration opposes the $300 million reduction to the request
to initiate the engineering and manufacturing development (EMD) for the
Joint Strike Fighter (JSF) and the addition of $150 million to extend
the demonstration and validation phase of the project. The Committee is
apparently concerned that the JSF will enter EMD before it is ready, and
the bill would mandate a delay in the start of EMD. The bill also
includes an objectionable legislated restriction on the use of funds to
develop a new ejection seat for the JSF. The Department of Defense
intends to conduct a thorough evaluation and testing of the program
before starting the EMD phase. The Committee's actions would limit the
Department's managerial flexibility and would be potentially disruptive
to the program. We urge the House to delete the restrictive language and
to fund the JSF as requested by the President.

Army Transformation

The President's FY 2001 request reflects a careful balance between
the Service's current and future warfighting needs. The request includes
sufficient funds for the Army to initiate its transformation effort in a
prudent manner and continue it at a sustainable rate. Furthermore, the
Administration is concerned that section 8115 of the bill would limit
the President's flexibility in developing an FY 2002 request, as well as
a long-range plan, that continues to balance competing priorities. We
urge the House to delete this provision.

Cooperative Threat Reduction

The Committee has eliminated funding for the construction of a
chemical weapons destruction facility at Schuch'ye, Russia. The nerve
agent at this site is in small, modern munitions that are easily
transported and mated to delivery systems that exist throughout the
world. They are highly desirable weapons for both terrorists and states
of concern and represent a serious proliferation risk. It is vital to
U.S. security to assist Russia in eliminating these munitions. In view
of the threat posed by these weapons, and the progress we have made both
with Russia and with the international community in meeting
infrastructure requirements at the site, the Administration strongly
urges the House to reinstate funding for this critical program.

Unrequested Funding for Procurement and R&D

Much of the additional funding in the Committee bill is for
unrequested procurement and R&D programs, funding that comes at the
expense of more urgent needs. The President's FY 2001 request meets the
$60 billion procurement target established in the Quadrennial Defense
Review (QDR) and represents a balanced approach to modernization. The
bill would add funding for several unrequested items such as $119
million for 11 Army Blackhawk helicopters, $15 million for two UC-35
medium lift aircraft, and $76 million for one additional KC-130J tanker
aircraft.

At the same time, the Committee fails to fully fund the development
of new technologies of importance to DoD, including a $65 million
reduction to two key information technology programs, Extensible
Information Systems and Computing Systems and Communications Technology.
The Committee also makes a $20 million reduction to Biological Warfare
Defense R&D while adding a larger amount for unrequested biological
warfare defense projects in the same program.

Chemical Weapons Demilitarization

The Committee bill would reduce the request for this priority program
by $76.4 million. While the reduction is not allocated to specific
programs, it seems intended to eliminate the entire FY 2001 effort to
develop technologies to treat and dispose of recovered chemical warfare
material. The reduction would force the cancellation of contracts
employing workers in eight States and delay the destruction of this
material, leading to a potential breach of the Chemical Weapons
Convention treaty deadline and increased risk to the public. We strongly
urge the House to restore funding for this priority program.

Tobacco Litigation

The Administration believes strongly that the Government should
recover the costs it has incurred treating smoking-related illnesses.
The Department of Defense spends hundreds of millions of dollars each
year to treat tobacco-related illnesses and has provided a modest level
of support to the litigation effort relative to the potentially
significant recoveries. The Department of Defense funding is making a
critical contribution to the Government's tobacco litigation effort. The
Administration strongly opposes any attempts by Congress to hamper the
Department of Defense's ability to support the tobacco litigation using
current statutory authorities. The House report contains such language,
which would require prior congressional approval of any reimbursement
provided by the Department of Defense to another agency to support the
Government's litigation to recover the Federal costs of tobacco-related
illnesses.

Overseas Humanitarian, Disaster, and Civic Aid

The Committee has provided funding for this account that is $8
million below the President's request, citing concerns that the
Department of Defense was funding requirements more suitably funded by
the Department of State. The Administration objects to this reduction
because it would constrain DoD's humanitarian assistance and demining
programs, which are critical to the Commanders in Chief's (CINC's)
regional engagement plans. These programs help the CINCs shape the
environment and prepare to respond rapidly and effectively to
humanitarian crises. Also, the U.S. military obtains substantial
training and access benefits from overseas humanitarian, disaster, and
civic aid activities, enhancing readiness across a wide range of
operational areas.

Headquarters and Management Staff Reductions

The Committee's reduction of over $244 million for staffing and
administrative functions in DoD headquarters, acquisition programs, and
overseas staffs would impose unattainable staffing limits on the
Department and hinder smooth operations. The Department is in the midst
of addressing the policy, programmatic, and resource implications of
Army Transformation, Expeditionary Aerospace Forces, and other
activities supporting the revolution in military affairs. Once fully
realized, these revolutionizing efforts will permit the Department to
react more effectively to post-Cold War national security requirements.
These efforts and the requirements to keep the Congress informed of
DoD's progress demand the professionalism and expertise of its staffs.
Budget-driven reductions to the staffs would only impede progress in the
revolution in military affairs, disrupt operations, and inhibit
responsiveness to congressional reporting requirements.

Critical Infrastructure Protection/Cyber Crime

The Administration urges the House to provide the President's request
of $1.46 billion for the national security community for critical
infrastructure protection/cyber crime. These funds are a crucial
component of the national, interagency effort to protect infrastructure
-- particularly information systems -- in both Government and the
private sector that is essential to the functioning of our economy,
national defense, and the safety of the population. The funds requested
for the national security community are necessary in order to protect
critical national security infrastructures against attack and to ensure
the integrity and security of both DoD and intelligence community
information systems.

Weapons of Mass Destruction

The Administration urges the House to provide the President's request
of $467 million for the national security community to counter threats
posed by terrorism and the use of biological and chemical weapons of
mass destruction. Adversaries are expected to rely increasingly on these
unconventional strategies to offset U.S. military superiority. The funds
requested for the national security community would improve our ability
to provide support to the designated lead Federal agencies for domestic
preparedness based on the national security community's long experience
with defense against weapons of mass destruction and its capability to
respond with specially trained and equipped personnel.

Coast Guard Funding

The House Defense Authorization Act authorizes additional funding for
DoD to implement a variety of medical, pay and other enhancements. Under
Title 37 of the U.S. Code, Coast Guard must match many of the DoD
enhancements. If H.R. 4576 funds these enhancements for DoD, like
funding enhancements should be provided by Congress to the Coast Guard.
Otherwise, the Coast Guard would need to redirect resources that support
vital Coast Guard missions.